Selling A Business
How Do Intermediaries Earn Their Fee? . . . Read more>>>
How To Sell A Business For All It's Worth . . . Read more >>>
80% Of Businesses Can't Be Sold -- For Any Price! . . . Read more >>>
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How To Sell A Business For All It's Worth
By Harvey L. Gardner
Business owners work hard for many years building a successful business. The rewards are worth the effort, but only when they sell their business do they finally realize the full value of their investment of time, effort and money. To sell a business for all it's worth, business brokers commonly recommend these steps.
1. Have a valid reason to sell.
Prospective buyers will want to know why you're selling. Their fear is that something is wrong with the business. Having a valid human reason for selling is your best first step. You will get better buyer response if there isn't any reason to doubt the viability of the business.
If you're just tired and burned out, say so. The most common reasons for selling are burnout, retirement, poor health, death, divorce, partnership disputes, relocation, and pursuit of other interests.
2. Don't wait until pressured to decide to sell.
Deciding to sell your business will be one of most difficult decisions you'll ever have to make. Many people wait too long to decide to sell and find themselves pressured by poor health, financial problems, or emotional stress. Avoid, if at all possible, selling under duress.
It will be like giving up one your children, but make the decision before circumstances force you to make it. Businesses generally take from 120 to 180 days to sell. Often it takes longer, so allow yourself plenty of time.
3. Maintain confidentiality.
The biggest mistake made by sellers is telling people the business is for sale before it's a done deal. When one sells a home or a parcel of real estate, they want everybody to know it's for sale. There is no stigma attached to selling a home. Everybody does it.
But it's different with a business. The rumor mill starts grinding when word gets out that a business is for sale.
Customers are afraid they won't be served. Employees are anxious about their jobs. Suppliers fear they won't get paid. Competitors tell everybody that you're going out of business. Sales slip; profits shrink.
Buyers perceive your business is in trouble, and that drives down its value. Talk to prospective buyers only, and require them to sign a confidentiality agreement before they know the name and location of your business.
4. Gather information needed to market your business.
Your business must be marketed and sold just the same as any other product or service. Put together a marketing package that shows your business in it's best light.
Assemble complete financial statements, income and sales tax returns, a list of fixtures and equipment, copies of deeds and leases, copies of any franchise agreements, copies of equipment leases and maintenance agreements, the approximate value of inventory at your cost, patents, and the names of your outside advisors.
In addition, you'll need a list of all loans showing the lender, the balance due, the interest rate, and the payment schedule.
5. Engage competent professionals.
Unless you're an experienced negotiator, it's recommended you engage professionals who are knowledgeable in the sale of businesses. Find a business broker with experience in marketing and selling your type of business.
6. Be part of the marketing team.
The broker may ask you to meet with the sales staff and tell them about your business. If the broker doesn't ask, volunteer to make a presentation to the brokers and to answer all their questions. You know your business better than anybody knows it.
Follow your broker's advice about dealing with prospective buyers. Some of the suggestions may seem odd to you, but there is a reason--you want to maintain confidentiality, and you want to get some offers to buy. An experienced broker will help you do both.
7. Don't let things slip.
Don't let things slip because you're selling. Keep normal business hours. Keep inventory constant. Advertise and promote the business to keep sales strong. Paint up and fix up. Make the business look as prosperous as it ever has.
8. Put yourself in the buyer's shoes.
Suppose you're visiting your business for the very first time. How impressed are you? How does the place look? Are your people friendly and helpful? Do the customers you speak to have good things to say about the business, its employees, its products, and its service?
9. Consider all offers carefully and make counter offers.
Don't panic if the first offer you receive seems too low. Be patient. Keep the ball rolling once an offer is made. Study it carefully. Make a counter offer. Even if you decide to market and sell your business yourself, it sometimes can be profitable to hire an experienced broker to negotiate the terms. Don't allow your emotions to stifle your objectivity.
10. Create a win-win situation for everybody involved.
There are no strict rules about selling a business. It will be worth to you what you can get somebody to pay you for it. As in all areas of life, there must be something of value for everybody in the transaction.
When you set out to sell your business, ask yourself: Is it the truth? Is it fair to all concerned? Will it build goodwill and better friendships? Will it be beneficial to all concerned?
This example illustrates a healthy compromise. When the final offer was too low, a broker suggested to the seller that he not sell his building, but lease it to the buyer instead. That resulted in a quick sale.
The seller benefited three ways by making it easier for the buyer to close the deal: he got 20% more for his business, he receives a monthly rental check, and the value of his building increases every year.
The buyer benefited because he was able to buy the business although he couldn't afford to buy the building.
If your deal benefits all concerned, you probably will sell your business for all it's worth.
Contact Harvey
80% of Businesses Can't Be Sold - For Any Price!
By Harvey L. Gardner
According to Business Brokerage Press, Inc. 80 % of privately-owned businesses cannot be sold even by skilled business brokers.
It doesn't have to be that way. I think there are three main reasons for this dismal record:
1. The owner has nothing to sell.
2. The company is in decline.
3. The business isn't marketed properly.
The most common reason for a business not selling, is that a business may be too owner-dependent. This is true of any business that depends on the owner to do everything. Personal service businesses such as professional practices, plumbing companies, consulting firms, and any number of one-person businesses fall into this category. When the owner sells out and leaves, there is no business, because the owner was generating all the sales. Many times a new owner is no better off buying an existing business such as that than he would be by starting a new business from scratch. Customers are dependent on and loyal to the owner, and when the owner leaves, the customers go somewhere else.
Businesses dependent on the skills and efforts of one person can be sold, but it takes planning. A business owner should be planning, from day one, to selling the business someday. Nobody lives forever, and it's a shame to reach retirement age, or be forced out of business because of poor health, and learn that your business has no value in the marketplace. Every business owner should know what the business is worth, and manage the business in a way that continually increases its value.
A second common reason for a business not selling is that the owner has allowed the business to decline. This can be for numerous reasons. Perhaps a major customer accounted for the majority of a company's sales, but suddenly stopped buying or switched to a competitor. Perhaps the owner just got tired, got sick, or simply stopped paying close attention to the business, so sales and profits declined. Maybe the company hasn't kept up with technology and it's equipment and techniques are outdated. Many times owners don't pay close attention to what's happening to the neighborhood, and the area becomes undesirable because new development lured customers to another area.
The third reason businesses don't sell is they are not marketed properly. To sell a business, it has to be marketed just the same as any other product. Sellers first have to find potential buyers; that requires marketing. Sellers must provide potential buyers with full and accurate information about the business; that requires accurate record keeping and organization. Sellers must spend time showing the business, providing information, to potential buyers; that requires time, a lot of time. And, it requires good negotiating skills; some business owners simply don't have good negotiating skills. On top of that, they are too emotionally attached to their business many times to be objective and flexible.
To sell your business for the best possible price, do this:
- Obtain a business valuation.
- Keep your business profitable and abreast the marketplace.
- Prepare for an eventual sale.
- Keep accurate records.
- Market it properly.
Contact Harvey
How Do Intermediaries Earn Their Fee?
By Harvey L. Gardner
Business intermediaries:
- Maintain total confidentiality.
- Work with the seller to establish a price for the business.
- Write a comprehensive sales prospectus.
- Prepare a marketing strategy to maximize the price.
- Interview, screen, and qualify prospective buyers.
- Market the business through many different methods, including our own database of buyers, the Internet, our network of brokers and industry experts, trade publications, newspapers, and other sources.
- Show the business only to qualified buyers, freeing the seller to run his business.
- Arrange a meeting with the buyer and seller at an appropriate and convenient time, and we attend all meetings.
- Work with the seller's outside advisors to make sure the sale progresses smoothly.
- Negotiate on the seller's behalf.
- Expedite preparation of closing documents and arrange the closing.
- Assist the buyer to facilitate an orderly transfer.
According to Business Brokerage Press, Inc., business sold by intermediaries sell for an average of 17 % more than those sold by owners.
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